Opportunity cost is the cost of doing one thing as opposed to another, or buying one thing as opposed to another.

For example, if you decide to skip work for a day so that you can go to the beach, the opportunity cost of going to the beach would be the pay that would have to give up by not working for that day. To get a true gauge of the cost of an activity the opportunity cost should be added to the actual cost of the activity. For the beach example that actual cost could be the gasoline it takes to drive to the beach.

Opportunity cost does not have to be simply monetary. An opportunity cost can also be measured in pleasure or other benefits. An example can be if you choose to go to the beach instead of to the park, the opportunity cost of going to the beach is giving up the possible enjoyment that you may have had at the park.

Thinking with opportunity cost in mind allows for greater decision making in all aspects of life as then only the truly profitable aspects of life for you are taken into account.